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Visa has agreed to pay rival card operator American Express up to $2.25 billion to settle an anti-trust lawsuit filed in 2004 alleging collusion to block access to the bank-issued card market in the
The suit, which was filed against Visa, MasterCard and eight major banks in November 2004, sought damages for business lost as a result of anti-competitive business practices. At the time American Express said those practices had effectively locked it out of the bank-issued card business in the
In a statement Visa says the settlement will also resolve claims against the banks originally named in the case. It adds that the settlement will ultimately be funded by members of Visa
Under the proposed agreement, American Express will receive an aggregate maximum payment of $2.25 billion. American Express plans to book $1.13 billion of the settlement sum in the fourth quarter 2007. The remainder will be payable in instalments of up to $70 million per quarter over the next four years.
"The size of this settlement, along with earlier court rulings, underscores the seriousness of the damage done by the illegal boycott," says Kenneth Chenault, chairman and chief executive of American Express.
In a statement Visa says by settling the litigation it is "not conceding any liability in the dispute" but is doing "what is in the best interests of its membership and the new organisation".
MasterCard now remains the sole defendant in the American Express case. Chenault says the company plans to move forward with the litigation to "hold MasterCard accountable for the illegal actions that blocked banks from working with us for many years and to seek full compensation for the value that would have been generated for our shareholders".
MasterCard spokeswoman Sharon Gamsin told reporters that the company remains confident about its defence against the allegations.
A new report compiled by Boston-based consultancy Aite Group which examines the payment card business following Visa's IPO suggests that American Express will become a significant competitor for both Visa and MasterCard in the coming years.
"Our analysis suggests that American Express is likely to be a significant threat for Visa and MasterCard, particularly in the
"Outside of the